Tony Vidler

It is our livelihood in many respects, yet one of the vaguest phrases we use is “personal service”.  What is a personal service is not necessarily the same as a personalised service, and what is personal to one client may not be deemed a personal service to another.

So how personalised should your professional services offer be, taking into account the types of clients you work with (and the varied expectations of different demographics and niches), and the type of work you do?  In other words, how much customisation should go into your personal service promise, and how much should be standardised?

Well, if we take a look at the structural differences – or service offers – of another profession it can help us to understand what might be possible for our financial services practices.

The medical profession consists of many different specialists and practitioners or carers with clearly defined skills sets and responsibilities.  Generally their skill sets or areas of responsibility define the service offer they provide, and the degree of personal “service” that their clients can expect.  In many professional services fields however, a practitioners area of expertise doesn’t define the value they provide quite so readily.  We can begin to think about the service offering we might provide though by looking at the medical profession as it does have clarity around where each professional sits in the value chain.

It is immediately apparent that a high level of standardisation in service delivery makes sense when the focus of the discipline is upon immediate delivery of a treatment.  Conversely, a far higher level of customisation or personalisation is required and expected when treatment is bespoke and requiring more advanced skills or knowledge to be able to deliver the a service effectively.

A further layer of consideration is the expectation of the customer.  Within this example, a client of a nurse in an emergency room will expect a higher degree of “personal” attention than the same client does when they visit the pharmacist afterwards to have the prescription fulfilled for ongoing treatment.  Make no mistake: both professionals have a role to play in this process for the client.  Both can kill.  Both can cure.  Full treatment requires both on many occasions.

However the pharmacist has an extremely limited relationship with the client.  Theirs is typically a transactional relationship only.  An order is fulfilled.  It is critical that the order is fulfilled precisely, and there is zero tolerance for error in doing so.  Both the nurse and the pharmacist will rely heavily upon standardised processes wherever possible to minimise risk to the client, and maximise the possibility of correct treatment being administered.  Anyone who has had a stint in hospital will know what I mean: you get fed up with telling everyone your date of birth and full name, right?  That’s standardised service – everyone follows the process, and everyone gets the process delivered to them whether they want it or not.

This is not the case however when the emphasis of the professional is upon detailed diagnosis which is unique to the client.  The client experience is more personalised – although the client experience with the surgeon (who they will actually barely talk to) is almost entirely focussed upon achieving a specified result.  It is a rather dispassionate process focussed upon the result rather then the person called a patient.

The process with a psychotherapist is hardly dispassionate or aloof though.  That is eminently personal and requires a trusted relationship which evolves. The psychotherapist follows a process, however there is inherently more flexibility and personalisation within that process than there is with the surgeon.

So how “personal” should OUR personal service be?

If we were to think about a professional services firm in the same context then it follows that the degree of “personal service” we should provide would be largely dictated by:

• the degree (or depth) of specialised knowledge we offer the market place
• the types of clients we wish to work with, and their expectations for the fee level we aspire to
• whether we anticipate a high contact/high engagement ongoing relationship, or a somewhat ad hoc commercial relationship triggered by client demand
• the commercial capability of our practice to develop and deliver either standardised services or highly bespoke ones – or both
• the style of delivery we prefer (are you the surgeon who just wants to focus on the task and obtain a successful result, or do you want high client interaction on an ongoing basis?)
• the brand of the practice, and what “it” promises to the market. In a practice with more than one practitioner there will be a range of personal professional views as to what constitutes “personal service”, and over and above these potentially differing views there is the position adopted by the practice itself (being the uniform approach which all the practitioners have signed onto as a minimum)
• the anticipated the focus of our solutions: transactional/execution services, or highly personalised diagnostic reviews resulting in bespoke plans? Or somewhere in between?  Or do we cater to both ends of the spectrum?

It is possible to cater to both ends of the spectrum (100% standardised as well as 100% bespoke), and I encourage professionals to consider building a practice which does so. There is typically room for both with a client base, given there will be clients who are in a transactional/execution-only mindset (perhaps because of the stage of life or circumstances), and there will be those who require our version of psychotherapy.

There is also a distinct possibility that a practitioner might fit into multiple boxes.  For instance the diagram could easily have the titles substituted as follows:

• Nurse = Insurance Broker
• Pharmacist = Mortgage Broker
• Psychotherapist = Financial Planner
• Brain Surgeon = Estate Planner

It is conceivable that a practitioner who was say a financial planner who also provided mortgage broking services could have a highly standardised, execution-focussed, broking service whilst also having a high-touch and highly bespoke financial planning service for those clients wanting long term personal planning.

Each practice and each practitioner will have their own view of what personal service is – and so too do clients of course. In the bid to develop a profitable practice where there is minimal waste and a homogeneous client experience though we should begin by identifying those services or clients where standardisation of service delivery is optimal – for us as well as for the clients.  Fully customised personal service should be reserved for those with the desire and the budget to fund it.

Defining which activities and elements of advice or service fit into the standardised version and which are reserved for customised service experiences is the challenge which each practitioner must resolve to their own satisfaction.

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Professionals have processes because they are good for business.

True professionals don’t just HAVE processes, they have processes they use everywhere in their work.

All the time.

Professionals are in fact process-driven.

We need to learn from those professions where the outcome of a poor day on the job is literally life or death. That isn’t generally the case for most professional services providers, however a poor day on the job for us can often have grave consequences for our clients.

Pilots are professionals. Pilots don’t wait until they are flying to go through the pre-flight checklist process. The use their process first to ensure that they have minimised the risks.  There is safety in the routine, because the routine is thorough and the routine is repetitively utilised. When they are in the air doing the actual flying, there are further processes. When they want to land, there are more.

Processes make sure nothing gets missed out….because missing stuff out leads to mistakes and mistakes are costly.  In their world, mistakes are deadly. In our world they are just costly financially, reputationally or in time perhaps.

Process has been getting a bad rap in financial services in particular because the word has effectively been hijacked.  It has been used so often in association with “compliance” or “best practice” that the very word “process” is now assumed to mean those other things.  Nothing could be further from the truth.

I had a conversation with an adviser which was essentially about lead generation, and in particular the lead generation which was happening from a good centre of influence.  Referrals are flowing reasonably regularly and there is mutual goodwill and understanding, and both are experienced and competent professionals. But the results are rather hit and miss, with a relatively poor proportion turning into actual clients.

So I asked “what is your process here?”
The response was centered entirely upon the compliance process – what documents were given at what stage and how the respective professionals were documenting their interaction with the prospective client.

Superb.  Everyone gets a compliance tick.

well…everyone who actually engaged got a compliance tick. But that wasn’t what the question was about. The question was about identifying the process for identifying and then engaging potential future clients.

The problem is that there is no qualification or engagement process. There is also no communication process between the two professionals. There are no checklists or flowcharts or agreements in place as to who would do what, or when, or who carries what responsibilities to the client.  Everything is ad hoc….every referral is an exercise in goodwill approached with an attitude of “we’ll see how it goes”.  Not suprisingly it isn’t going so well…every referral (or introduction) has a different experience in working with these 2 professionals jointly.   Every introduction carries uncertainty and mis-matched expectations for everyone involved.

Good processes are simply the result of anticipation based upon previous experience. Anticipating what can happen, and what is likely to happen, and what needs to happen to deliver a consistent service to a high standard. Capturing that thinking and anticipation into a series of steps, or tick boxes, or templates, or whatever works best for you, is what becomes a “process”.

The two key points are that good processes are thought through, and then documented in some manner which can be followed reliably in the future to ensure that critical steps are not missed.

Processes reduce the risk of us missing critical engagement or communications steps simply because we were busy. Processes ensure efficiency because everyone involved knows what their role is, and when it is needed.  Processes produce consistent client experiences and deliver reliable service standards, and that reflects well upon everyone involved.

Processes are good, and ultimately the right processes improve profitability for the firm because they reduce the variability in service delivery which tends to blow out costs or adversely affect conversion and retention rates. Good processes also introduce leverage in the form of capturing systemic knowledge and then passing it on to other less experienced or knowledgeable staff in a comprehensible format which they can follow, resulting in them ideally duplicating the desired service or communications experience at a lower delivery cost. That is intellectual property, which in turn affects business value.

Professionals have processes. Processes that improve profitability. Processes that match behaviour to purpose.

Professionals have processes because they are good for business.

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To the extent that advice can overcome barriers to advice could be a game changer.

There are many barriers which can prevent a prospect from engaging in the professional financial advice process, and those prospect barriers are our problem to address. We have to try and eliminate or negate all of them.

The first step in understanding how to negate them is of course being able to identify them.

Regardless of the specialist area of financial advice the following barriers exist for the majority of consumers:

1. Awareness of need or potentially beneficial products
2. Limited experience of professional advice processes or value
3. Inadequate financial literacy or knowledge
4. Cynicism, or doubt in industry generally
5. No sense of immediacy to resolve long term or perceived low risk personal planning issues
6. Poor reputation and low trust in the financial advice component
7. Fear of being misled or sold inappropriate solutions
8. Inconvenient, expensive, boring and time consuming purchase process
9. Establishing required level of trust with an individual adviser
10. Information overload (too much complex information and jargon in early stages of engagement)
11. Perception of being overly intrusive (too much medical, financial & lifestyle disclosure on the consumers part)
12. Disproportionate sense of commitment (consumer has to sign “contracts” or enter into arrangements spanning decades)

The power of word-of-mouth, or referral, marketing is that it virtually eliminates barriers 2, 5, 6, 7 and 9. The transfer of trust which arises from those peer to peer recommendations does actually negate a number of the barriers to prospects engaging with us.But not all….and our marketing and communication must resolve these barriers in order for a consumer to engage us.

If we are trying to engage with a larger pool of prospective clients, and not just those arriving via personal introduction,  then our marketing and communication has to handle ALL of these issues at some point. While I have arranged the barriers in a generally logical (or perhaps chronological) order we should not take it for granted that consumers will wish to have each addressed in the same sequence.  So we cannot take it for granted that some of these barriers will be resolved when we actually get to meet prospects and go through our disclosure discussions….many will want those issues addressed before deciding to engage.

An effective marketing plan should ensure that it confronts all 12 barriers head on. Call out the ghosts….address the elephant in the room….pick your own metaphor for it, but deal with them up front. We cannot ignore them as they are real issues for the consumers who we would love to have as clients, and those consumers will not become clients until these barriers are addressed or negated.

All of them, that is.

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Tony Vidler

To get prospects to buy your advice and change direction you have to “sell emotion” and support it with logic, right? Not quite….there is a piece missing in this formula which is is largely accepted as the methodology for selling intangibles I believe.

I believe that the missing ingredient is “beliefs”, and it is understanding the buyers beliefs to begin with which enables a great professional to figure out how to make the advice both palatable and actionable to a prospect.

Let’s use a simple example to illustrate what I mean.

Say you were a financial adviser focusing upon long term financial independence planning and you were dealing with a prospect who had 10 years to go until retirement.

During our initial discussion we have established that the prospect has a vision and desire of living a retirement lifestyle which is largely unchanged from their existing lifestyle – albeit without the “working for a living” part. They still want to go on an annual overseas holiday, drink wine and dine out, and play lots of golf or whatever around the country.

Quick number-crunching of the sort that we can all do in 2 minutes on a calculator shows the logical extent of the problem: they are currently on track to run out of money on the second Tuesday after they turn 65.  They have nothing of consequence saved for the future in other words, but have a vision that life will be wonderful and abundant.

Not an uncommon situation in reality, although perhaps I have exaggerated slightly.  There is however frequently an enormous gap between a prospect’s financial capacity and their voracity.  A big gap between what they have and do and what they expect they will be able to have and do in other words.  The barrier to change is their beliefs.

That is the area which we professionals often fail to investigate and understand, and as such it becomes the barrier to getting the prospects to buy our advice.

Gong back to the example for a moment, the barrier here will typically be a belief that “all is well” and there is no requirement for planning. Perhaps an illogical belief in a social welfare system that will support them for life…perhaps a more logical belief that an inheritance will take care of everything…perhaps an entirely irrational belief such as “we will win the lottery and not have to worry”.  But there is a belief issue of some sort.

Until the prospects beliefs are known no amount of logic and no amount of emotional “selling” will shift them to follow advice which is rational.  To them, your rationale is irrelevant.

Obviously the first step is to uncover whatever beliefs prospects hold, in addition to the necessary understanding of the facts & figures, as well as determining what their goals are.  The easiest question in the world to begin uncovering beliefs that may be barriers is a direct one, but without being confrontational:

“The first thing we need to take into account is who else is contributing to your retirement before we worry about what you have to put in, so what do you expect from government, relatives, business sales or anything like that?”

The temptation for many professionals once the prospect answers is to challenge any illogical or irrational beliefs.  That is a surefire way to lose a prospect straight away.  Challenging a belief with logic is tantamount to saying “you are stupid; just listen to me”.  Generally people don’t respond well to that….

What we have to do is create doubt.  We have to create a situation where they question their own belief themselves. We do that by asking

Rather than have the logical answer (or facts) and then try to convince prospects by tying that to emotional selling points (e.g. fear, greed, love), it is far more effective to appear to not have the answer early on in the process.

The more “what if’s” that are asked, the more doubt which is created.  The more doubt that is created about a prospects existing belief-set then the greater their likelihood of anchoring their future beliefs on the facts and logic which you subsequently present.

Jumping straight to facts or logic to begin with, as so many professionals tend to do, doesn’t shake the incumbent belief-set.  That is one of the reasons why so many prospects do not convert, or are just sheer hard work to convince of the right way forward.  You have to lead them to change their own mind themselves…you will not change their belief set by challenging it with pure logic.

Get some “what if’s” into your advice process before presenting logic or recommendations and you will get more prospects to buy your advice.

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There remains no substitute in professional relationships for good old fashioned “talk”.

Word-of-mouth remains the best marketing professionals can use, or get. The next best is “talk”.  Talk to clients and prospects directly.  One-to-one…actually spending time communicating directly with each other…voice to voice…human to human.

While I love using digital and leveraging it to communicate to as many people as possible, and it is very effective at doing so, there remains no substitute in professional relationships for good old fashioned “talk”.

My own experience is an excellent example I believe.  Putting together a rather unique marketing approach for a small hand-picked team of advisers has been an interesting exercise in communication.  Remember that these are highly educated, intelligent, articulate professionals who voraciously consumer megabytes of information in any given week.  They are generally pretty good at learning new stuff fast, and then figuring out how they are going to use it.  And these people all want to talk to me about the thing I am putting together for them.  They are way beyond “interested”…this is no cold-calling sales exercise.  So the experience has largely been:

• I put an outline of the concept in writing, and support that with attachments that have a LOT of detail for
• those who love that sort of thing.
• I follow it up a while later to make sure we have indeed answered all the key questions at the outset
• I run a training webinar for all of them focussed on the details which I think they want to know about
• I follow that up afterwards with a recording of the webinar, copies of the material covered in hard form, and and some additional resource.
• I put together additional training video’s, presentation material and sales collateral for them to use, and deliver all that.

The end result from weeks of rolling out info on what these people want me to roll out info on?

Them asking: “Can we sit down and talk about this one-to-one?“

No matter how good people are at absorbing information in writing or from video’s or from visual aids, they nearly all wanted validation of their decision-making through personal conversation.   That is all it was too: each had all the information necessary to make a decision, and each had pretty much their decision as to what they were going to.  But virtually all wanted the one-to-one reinforcement that they did have all the information necessary to make a good decision, and nearly all wanted to test their thinking out loud with another human being who understood the matter before them.

How is that different to our prospects and clients?  I don’t think it is different at all.  With all the best presentation material, plan writing, disclosure and ongoing digital communication, the majority still want to test their thinking and have their decisions validated before making significant commitments.   discussions.

The conclusion I came to in recent weeks is not a revelation; it is a reminder.  Spending time one-to-one talking to our clients and prospects generates fabulous results.  The return on time invested is well and truly worth it because it dramatically increases conversion.

We can be efficient and get our message out in multiple forms and immense detail to volumes of people simultaneously, and that has merit.  At some point however we need to move the people we are talking to down the decision-making path and get them take action on our recommendation.

It seems there is still nothing better than talking directly to people to get them to move down that path and to act.

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Buying another business to grow your own can be a great move without doubt.  But, one should really question the motivation, the rationale and understand thoroughly and logically what the benefits from acquisition are.

Many firms facing increased overheads and infrastructure costs in the next few years are considering acquisition or merger strategies as a survival or growth strategy.

Generally there appears to be  5 main reasons that advisers suggest as their reasons for acquisition of another business. They are:

1. Get new clients
2. Increase business turnover
3. Increased cost efficiency
4. Diversify business lines
5. Enhance market position

ALL of these reasons offered CAN be perfectly valid and logical moves for a smart business owner….

BUT….there are many occasions where some simple questions can head off a purchasing (and/or financing!) disaster too as growing through acquisition or merger may well compound problems, rather than lead to a better business.

Some of the issues or questions to consider prior to deciding that this is the right strategy for growth would be:

Get new clients

The one question that I ask immediately when encountering this idea for acquisition is “what’s wrong with the business – or the clients – that you have?”

It may be that there’s nothing actually wrong with your existing client base, though it is usually suggested that there are just not enough of them.  Usually that suggests a problem with the business model of the firm: too focussed upon transactions and insufficiently focussed upon delivering valuable service and ongoing advice.

Even if the business is fundamentally delivering value to existing clients though, generally the desire to simply add more of them rapidly through acquisition suggests that there are some likely problem areas already within the practice, such as:

1. Poor or inadequate marketing (which may be a wide range of things such as branding, positioning, value proposition, etc)
2. Poor engagement (you’re generating leads and business opportunities, but not engaging or converting enough of them)
3. Inadequate sales skills (people in your business are blowing the good work done by your marketing perhaps)
4. Poor business systems (inadequate information and data management; poor advice processes; etc)
5. Providing the wrong thing (amazing but true!  often advisers with a business problem are simply not giving their natural – or target – market what it is they actually want and are willing to pay for)

Often there is a belief amongst advisers that simply having more people to see, or “fresh” clients to wheel out the same story or service offering to, will somehow transform their business.  What is that old line about “doing the same thing but expecting different results….“?

Increase business turnover

No doubt, adding more paying clients will increase turnover, or gross revenue.

But does that actually help?

Two simple questions are a logical starting point:

1. How much extra turnover, or gross revenue, will the new clients bring in?
2. How much of that gets to your bottom line?

The financial focus for acquisition should be on profitability for the business, rather than merely turnover. While this may sound like ” business 101″ it is an often forgotten point. This rationale of simply pursuing increased turnover quite often suggests an existing business that has little internal financial knowledge or systems…in other words, a business where just adding bulk may well compound any existing problems.

Improve cost efficiency

This is potentially an excellent reason for acquisition, particularly in businesses that have relatively high proportions of fixed overheads and relatively low service delivery costs per client.

Once again there are two simple questions to begin with if this is the motivation for acquisition:

1. How does it improve your cost efficiency?
2. So, how much do the anticipated cost savings add to the bottom line?

The first is a really big question that reveals very rapidly the level of understanding that the existing business owner has of their own business fundamentals.  Asking them to think through the areas where costs may be saved, and then identify the details of those theoretical cost savings, is illuminating.   It is also an area which is usually seriously over-estimated.  Rarely do the synergies and efficiencies from acquisition or merger flow through quite as well in practice as they did in theory.

Most financial advisers (despite their personal financial literacy) have poor data and therefore poor internal intelligence on their own client profitability – how the different types of costs are allocated across different types of clients within the firm; what the marginal cost of each additional client will be in servicing or efficiency within their business; how the fixed costs will be affected by additional capacity requirements and so forth.  If that is the case, then it becomes very difficult to assess the efficiencies that can be gained from acquisition with any real accuracy.

Diversify business lines

The argument here is that the new business introduces additional opportunities to the practice through the acquisition of intellectual property, people or systems.

When this is provided as a reason for acquisition one of two things is occurring:  either it is a clear sign that there is a complete lack of strategic clarity and planning ability; or; at the opposite extreme, there is very good strategic thinking at work.  Business owners looking to acquire for this reason are either thinking “I need more stuff to sell”, or, they have a clear idea of where their business wants to be positioned in the future and have decided logically that it is cheaper to purchase the next piece that moves them closer to the goal, rather than to spend the time and money in development themselves.

It is just a matter of working out which of those two conditions are prevailing….and once again a fairly simple question gets to the heart of it:

“how do the new business lines lead you more quickly to achieving your vision?”

If it is the later reason for acquisition, then generally it can work out very well indeed.  If the former, there is a tendency once again for an acquisition to be less successful than anticipated.

Enhance market position

Bigger is not always better, and if the rationale for increasing in size is merely to cater to an egotistical drive or need it is probably a waste of time.  However, bigger can certainly be more valuable.

One of the best examples I have heard of was a financial adviser whose business had grown fairly large organically over many years, and after some sound strategic thinking they decided that “get big quickly” was the right way forward.  The reason?  To sell the business at a premium price and retire.  A series of rapid fire small acquisitions, a re-branding exercise across all new purchases, implementation of some standardized systems…and 6 months after all of that sell the lot at a vastly higher price then they could otherwise have done.

As an exit strategy it can be risky – but very worthwhile.  Whether it is worthwhile really does come down to that clarity of vision once again though.

Buying another business to grow your own can be a great move without doubt.  But, one should really question the motivation, the rationale and understand thoroughly and logically what the benefits from acquisition are.

If you do so, then there is a very good chance that the pieces will fit together well for you.

The post Is acquisition, or merger worth It? appeared first on AdviserVoice.

The ability to take a successful set of systems and apply them across other business units can be the most valuable capital element in a professional services firm.

Creating great capital value for a professional services firm is usually one of the owners primary objectives as they more often than not see their business value as a critical part of their own financial independence.

Building a profitable business is obviously essential, and it is a more valuable profitable business if a large proportion of the revenue carries certainty of continuity for any prospective purchaser. Pretty much everyone gets that of course, hence the emphasis upon growing renewal commission income or setting ongoing fee for service or advice contracts with clients.

That’s the first key lever that ratchets up the capital value of a firm: predictable revenue.

The more certain a future income stream appears to be, the more highly it is generally valued by an investor. A firm which is dependent for its revenue upon the key sales skills of a handful of rainmakers just doesn’t have the same predictability in future revenue as one where clients hold ongoing contracts for service with the firm for example.

The second big lever is dependable experience. The client experience with the firm in terms of the type of advice or service they receive, and the consistency with which it is delivered, the positioning and branding of every client interaction creates certainty for the clients. In certainty there is familiarity, which leads to trust and a consistent feeling of expectations being met.  That homogeneous client experience leads to higher retention of clients, and if done well it also leads to higher ongoing participation by clients in the firms services. So dependability delivers clients who will stay longer and also do more business with the firm. THAT is worth paying a bit more for if one is buying a firm, right?

How transferable is the firm? If extracting the capital value to fund the current owners retirement is an objective, then one of the key valuation considerations must be “how easy is it for someone else to step in and run this business and gain the expected business performance?“

Staff contracts and  culture, IT and client management systems, advice or service systems, prospecting and marketing methodologies….these are all examples of the areas where significant roadblocks (or value detractors) can lie….or where major enhancements to capital value of the practice can be created. Smart business purchasers will give some serious consideration to the ease of transfer of ownership, or integration into another business, and their view of the value of the firm will be adjusted accordingly.

The last of the big levers driving higher value for professional services firms is whether the business has the potential to be repeatable. Not all business purchasers actually want a practice which can expand into multiple locations or markets of course, but the ability for systems and intellectual property to be duplicated and repeated elsewhere is attractive to a purchaser. Often we have seen institutional buyers of advice practices over the years, and it is this 4th key lever which often drives the transaction. The ability to take a successful set of systems and apply them across other business units can be the most valuable capital element in a professional services firm.

If a practitioner were to build all 4 of these into their firm there is little doubt that the firm will be far more attractive to potential purchasers, and attract far greater valuation multiples than the atypical practice.

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The differences between the high performers and the average ones are not magic.

Advisers frequently settle for being average, and it is definitely not because they want to be average but because they don’t really know what it takes to elevate their performance exponentially. Average adviser performance can be turned into outstanding adviser performance by making the changes that make the difference.

The average advisers often ask how someone else can be so much more successful than they are and assume that there is some magic at work.

The differences between the high performers and the average ones are not magic, and nor are they unachievable for the majority.  In fact, it is mostly about being better organised, being more transparent, and communicating better.  These are elements that any adviser can work on immediately.

High performers are better at understanding their clients key expectations:

• listening and understanding their needs
• being continually trustworthy
• depth and breadth of industry information the adviser can provide
• being a problem solver
• timely and personal, not mechanical, communication
• overseeing the family’s financial affairs – not marketing products to them
• delivering high level personal service.

They get more information and know their clients better.

They listen better.

High performers also focus on the financial factors that their clients care most about, which are:

• meeting investment performance expectations
• protecting investments from downside risk
• making them fully aware of fees all the time
• helping create a financial plan and keeping it current
• using current technology for access and reporting
• coordinating and organizing their financial documents
• providing appropriate insurance solutions – and only for as long as they actually need them

They are focused on what matters to the client.

They put the clients interests first.

The high performers core business attributes?

1. Their team works as a unit and practices effective delegation.
2. Everyone in the business has clear roles and responsibilities.
3. They deliver a consistent client experience.
4. They do not try to be the experts in everything, but bring in the right experts their clients need.
5. Achievement focussed, with high energy levels and high job satisfaction.
6. They focus on face-to-face communications wherever possible.  The telephone or email is a secondary preference.
7. They are proactive in tough times – and raise the communication levels.

They play to other people’s strengths.

They have high expectations.

Compare this to the attributes of the less-than-average adviser:

• It is all about me, the adviser.  “What is in it for me” is the dominant mindset.
• Minimal delegation, and adviser tries to be the “main man”.
• Blurry roles and responsibilities within the firm, if indeed there is actually a “firm”.
• Inconsistent client experiences.
• Adviser tries to do, and be, everything.
• They project their own value based on market movements or product performance.
• There is a strong transactional approach, coupled with a “follow what’s hot” mindset.
• Opinionated, and with a narrower knowledge base.
• Tend to be sedentary, often on the phone or at the desk for bulk of the day.
• Status consciousness, with accompanying money focussed.
• High stress and angst, accompanying relatively low job satisfaction.

As the two types of adviser are compared it becomes obvious quite quickly that the difference between the high performers and others largely begins within the advisers own mindset and attitude.  Particularly the attitude towards clients.  The approach they take to their clients would actually appear to be the primary point of difference when you get right down to it.

Combining that attitude with some sound commercial and management skill and a willingness to invest in building a business rather than executing transactions is the “magic” if there is any.

Building leverage within the business and the customer experience with a great support team that plays to individuals strengths then leads to exponential growth.  Add in constant quality communications and a client service focus which improves account retention and you have a winning business model.

It begs the question:  If that is all it takes, why would anyone settle for average adviser performance?

The post Why settle for average Adviser performance when you could be outstanding? appeared first on AdviserVoice.

In the last couple of years more and more advisers are recognising that being profitable largely consists of figuring out which areas make money.

The first rule of business is “be profitable”, and that is a concept which appears to cause industry stakeholders some issues when it comes to judging financial advisory firms.

That pisses me off to be honest.

In any number of countries there is debate driven from government, consumer advocates, regulators and those with a vested interest in improving their own profitability to drive down costs in financial services distribution.  The “Costs” that need saving is generally accepted by these industry stakeholders as being just the cost of the adviser in all of these arguments it seems, to the exclusion of almost all other costs of manufacturing product or services.

It ignores the obscene profits of large institutions, and the gross salaries they pay their most senior people.  It ignores the multi-layered management tiers consisting of people spending their lives meeting other people from within the management tiers.  It ignores the incredible inefficiences of so many sectors of the industry that merrily blow shareholder and policyholder and client funds on poorly thought out projects and purchases.

Yes. To make things better for the consumer we merely have to reduce costs amongst those self-employed small business distributors.

It pisses me off because most distribution businesses ARE actually small businesses…where the owners earnings fluctuate wildly from year to year in many cases, and where there is very very limited ability to pass on dramatically increasing operational costs to consumers swiftly – and frankly most distribution businesses try pretty damned hard NOT to pass on costs to their clients. They try to improve services within the same cost structure; provide plenty of jobs and are usually far more caring and amenable employers to their staff; and most importantly they are generally the ones leading in innovation with the uses of technology and service standards.

They sure are a problem aren’t they?  The idea that the owners might make a profit from their risk-taking and long hours (far longer than the staff they employ) is anathema it seems.  So in the interests of perhaps helping some in society understand who makes money and how here’s what happens with the firms that make millions if not billions each year (and that is not distribution businesses).

Traditionally a financial institution of any sort generally set its product price by taking into account:

• Operational costs (the ivory towers, salaries of staff, corporate golf days, strategy retreats, coffee budgets and everything else that goes with running a funds management, lending or insurance company)
• Distribution costs (what is paid to get the attention of potential salespeople or brand influencers, together with what is paid directly to them if they succeed in moving any of the institutions product into the marketplace)
• Reserves for liabilities (money which must be kept aside to fund anticipated insurance claims in the future, or meet solvency requirements, etc)
• Investment Returns (the amount of money that can be made from the money being kept as reserves, which should serve to reduce the cost of product today)

Interestingly there appears to be very little focus or discussion on why operational costs for institutions are what they are, and whether or not there is a negative impact upon consumers from the decisions made by institutions.  Even at the shareholders annual general meetings there is little questioning of any depth on some of the costs.  Equally, there seems to be very little discussion about the lack of favourable impact on pricing that prudent investment should have.  Instead, what appears to be the norm is that investment returns by institutions are captured as “profit” for the institution.  That is, instead of being a positive factor in anticipating future pricing or requirements for reserves for consumers, it has become a number which gets reflected in the annual report of the institution as money made for the shareholders in the financial reporting period.

It seems to me that the net effect is that financial institutions are able to keep the upside for shareholders and pass on pretty much all the downside to consumers or distribution to wear.  Of course consumers can’t be blamed for the spiralling costs of the institutions or the pressure from their shareholders to announce a new record profit each year, so we are back to “it must be the  distribution costs”, right?

The attention then focuses upon the cost of distribution to the exclusion of all other costs or financial wizardry in the annual accounts of the institutions….and financial advisers become scared of being seen as profitable in their own right.   After all, we are almost solely to blame for rising insurance premiums (or whatever), aren’t we?

I call Bullshit.

Reality check time for advisers: the first rule of business is “be profitable”, and that is a rule that everyone else in the industry is comfortable with so it is time for distribution businesses to get comfortable with it too.

It is absolutely okay to make sure your firm is making enough money to create jobs for others, and buy services and products to run your firm which keps other small businesses in business, and contribute positively to the economy.  It is absolutely okay to make enough money that you can pay yourself a decent amount (especially when most small business owners such as financial advisers are usually working 1.5-2 x any other full time employees hours).

It is also absolutely okay to be profitable enough that you can afford to spend the time doing some pro bono work each year to bring your expertise to those who could otherwise not afford any professional help.

It is not okay to spend your time and firms resources trying to provide advice or move products because a regulator or institution would like us to – but would also like for us to do so at our cost rather than theirs.

What has fired me up about this is that recently I was being questioned about why so many advisers in this country in the last couple of years had gone from providing holistic or wide-ranging advice to a narrow field of specialisation, often working with products or advice areas that had high commissions.  It was suggested that surely that was a sign that “advisers were motivated by greed and not considering the needs of society as a whole?“

My response was threefolld, but I shouldn’t put in print my first reaction.  What can be published is the next 2 points:

It is a politicians job to consider the needs of society as a whole – that is what we elect them for. That is not an advisers job, and nor is it within their power.  So if you aren’t happy that society as a whole is not being adequately cared for take it up with your local member of parliament.  It is not the financial advisers role to fix society as a whole.
The first rule of business is “be profitable”, so here is how any half-smart business owner is going to look at the various needs of society:

To be blunt, there are only so many people that any individual adviser can help; we are not social workers.  Having said that; most good advisers do actually have a strong social ethos and a part of why they do what they do is because they want to make a difference in peoples lives.  The desire for social justice and elevating others is a strong feature of most good practitioners.

But there are only so many hours of daylight and only so many years of life for most of us.  There are limits to what we can do, or are willing to do. However for those who the advisers do take on as staff or suppliers, or those who become clients, there is an obligation to try and deliver the best value and as much certainty as possible.  So before any adviser can focus upon doing greater good for the wider society they need a profitable business base to work from in order to meet their obligations to those who have already placed their trust in the adviser.

It is perfectly reasonable – in fact it is smart – for advisers to disregard products or advice lines where they simply cannot deliver them profitably.  It is just as smart and just as reasonable for distribution to accept and acknowledge that it cannot help all consumers equally.  Some need to be served by different advice models, such as those offered by the billion-dollar-a-year-profit-making institutions, or they need to have their requirements served by our social welfare systems that the self-employed fund through our multitude of taxes.

In the last couple of years (in this country at least) more and more advisers are recognising that being profitable largely consists of figuring out which areas make money, and then just staying the hell away from those where there is no money to be made.  The same goes for which segments of society we can help: stakeholder groups we must understand and accept that in the main financial advisers can only help some consumers.  If we do that well and profitably THEN we have the wherewithall to deliver some pro-bono services and time to those who cannot afford high quality advice but who will benefit from it.

Regardless of what institutions, regulators or consumer advocacy groups would like this is the smart play, otherwise we too will become bankruptcy or unemployment statistics.  The rest of society who we cannot afford to help should be served by the obscene profit makers within the industry and the other tax-payers.

We pay more than our share and do more than our bit already.

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Tony Vidler

Who is paying who for financial advice will become the biggest question in consumers minds as the industry stakeholders continually and very publicly debate fees, commissions and conflicts of interest in financial services.

For many advisers yet to experience it, full transparency on costs and fees is good for business. It is the right way forward because it builds trust on the part of the consumer, and it helps establish the value conversation which in turn helps correctly to position advisers in comparison to sales-people.  That’s a great thing for everyone except maybe the sales-people.

The who is paying who question is however a question that many advises in transition struggle to answer adequately when commission on products is part of their remuneration mix today (and maybe forever).  It does need to be answered honestly and professionally, and if done so it should help advisers get paid a fee for their expertise directly by the client while potentially still leaving the door open for being paid in a different way for other work with the same client.

I have no objection to commissions as a form of remuneration, and do in fact argue strongly for commissions as a form of financial adviser remuneration in many parts of the industry and advice process.  One should not assume that my comments to come are any sort of anti-commission bias.

But while I absolutely believe that professional advisers should charge the client directly in the form of a fee for planning and pure advice, I do also believe that advisers need to educate clients on the range of possible engagements and what work is required from each of them. Whether that advice is investment, debt, risk management, taxation advice or whatever is irrelevant.  A professional adviser specialising in any one of those fields (or any other) who provides their time and expertise to a consumer deserves to be paid for that given the adviser is trading time, reputational, legal and regulatory risk.  Traditionally the adviser has assumed the business risk of not charging the client directly for that expertise, and instead working on a “success fee” basis only.  That is, advisers have worked on the premise that if the consumer judges the advice to be good and we were able to get a recommended solution in place on terms the consumer was happy with, then we get paid a success fee in the form of a commission from the product placement.

A success fee in the form of a commission for successful implementation of advice recommendations seems reasonable to me, and actually presents good value to consumers generally.

However, prior to implementation of recommendations is the time consuming area of planning – or devising strategy for the client – which is where the advisers actual skill and expertise should be valued separately.

This should be valued separately and in addition to the time and effort that the adviser might be remunerated for if there is  implementation work to be done sometime after a strategy (or plan) has been developed and delivered.

The challenge for many advisers moving to this approach is how to introduce a fee for the planning element when the consumer is often comparing that adviser to a competitor promising to do the “planning” for nothing.

The answer is remarkably simple.  Say the following: “nobody is working for nothing.  Somebody is always paying, and whoever is paying is who that other adviser is working for.  If you are not paying them directly then they are not working for you.

Your question regarding the fee I charge is a good one, and the answer is straightforward: I charge you a fee because I am working for you.  The person who says their plan is free is being paid by someone else to deliver someone else’s agenda….not a plan to meet your goals.”

Then perhaps show them visually what is involved with each possible piece of work and talk to that…

Of course the adviser still needs to establish their value to the client, which will dictate what fee level is appropriate and fair and a good exchange of value.  However the question of whether a fee should be payable at all by an intelligent consumer is essentially addressed and dismissed with this approach.

End of issue really….it is that simple.  If they don’t get that, then you’re probably best not to work with them anyway.

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